Yes, you MUST try this pricing strategy!
The Crazy Part
It may sound nuts, but here goes...
You should be changing your prices EVERY SINGLE MONTH.
What?
It sounds crazy, right? But hear me out. Over the last two years, restaurant owners all over the country have struggled with volatile price increases with staples like milk, beef, chicken wings, and (dare I say it) eggs. Eeking out even a few points of profitability has gotten nearly impossible in the current climate.
And yet, profitability is the foundation to a healthy business.
"Control the controllables," they say. (Good advice, by the way.) And pricing is an important controllable in our business.
And I believe you should be increasing your prices EVERY SINGLE MONTH.
Let’s Get Real
And now, I'm not saying to increase the price of your entire menu each and every month. Just a portion of the menu. And I want you to be methodical about it. The question will no longer be "Should I raise prices?" Instead you'll be asking, "What items should we raise prices on?"
Too many owners out there stress over what they think their guests will pay. And I get that... you want it to feel like a good value, because otherwise people will stop coming altogether. But when you hem and haw over increasing prices, you involuntarily subsidize meals while you delay taking action.
If you don't protect your margins, I promise that no one else will. Over the years, by NOT raising prices, you have groomed your patrons to expect low prices. But that's just not realistic anymore. When the cost of goods fluctuate, you have to be willing (and able) to pass along those costs. It's inevitable in a capitalistic system like ours.
Put It into Practice
The best way to put this into practice is to sit down with your menu on the 20th of every month and decide which items will be increasing in price. You make those determinations by 1) looking at your plate costs and see where profitability is wavering, and 2) by reviewing your PMIX to see which your most profitable items are.
Popular items will almost always trade at a higher price than what you're currently charging. And items that have inched up cost-wise now need to be brought back in line. You're going to raise prices on roughly 10% of the menu this month, and every other month that follows.
I call this Popcorning Prices.
Popcorn kernels don't pop all at once, but rather little by little over the course of 3 or 4 minutes. The same is true at a supermarket, for example. Over the course of a year some prices will go up, others will go down, but the ultimate result is that a household’s grocery bill will be about 5-7% higher over the course of 12 months.
Know the Best Part?
The best part is this: You'll now be grooming your guests to expect those micro-increases over the year. It won't come as a shock (as it probably does now) because you won't be increasing everything all at once.
Instead, you’ll be making changes little by little, in a very deliberate way.
Ours is a business that lives and dies by margins. And this is the pricing strategy that will help you stay profitable all 12 months of the year.
Chip Klose - Helping independent restaurant owners hit consistent, predictable 20% profit Restaurant Coach, Author, Keynote Speaker with 25 years of industry experience.
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